Business cycles, financial conditions, and nonlinearities - with Ivan Mendieta-Muñoz,

This paper proposes a conceptualization of business cycle fluctuations in which the role of financial conditions and nonlinear dynamics are explicitly incorporated. We emphasize that the sources of instability in an economy cannot be associated exclusively with the real or financial sectors, and we incorporate the idea that financial conditions are both important sources of instability and possible nonlinear propagators of other sources of instability. We test the propagation mechanisms of such conceptualization using a Bayesian Threshold Vector Autoregression model for the US economy.

Not your average firm: A quantile regression approach to firm-level investment in the United States,

A significant portion of the work published on firm investment adapts models that operate on an “average firm” assumption, which is different from the investment behavior of a modal firm. This study employs a Bayesian quantile regression model to explore the investment rates in the United States and finds, first, that the firms with higher investment rates have a higher responsiveness to the valuation ratio and lower responsiveness to the profit rate, and, second, that there is a decline in the responsiveness of firm investment to these factors in recent years. The paper also emphasizes the role of autonomous investments in determining firm-level investment rates, based on differing sectoral factors.

Working papers

Competition and Accumulation in Quantal Response Statistical Equilibrium,

This paper develops a statistical equilibrium model of the firm facing opportunities of profit and growth. A joint equilibrium distribution of profit rate and growth rate is obtained where firms’ probabilistic decisions to compete and allocate their resources and these decisions’ impacts on market outcomes are studied. Using this model, the paper estimates the joint probability density of profit rate and growth rate using firm-level data for the US, between 1962-2022 and documents the time evolution of competitiveness and accumulation behavior.

Relative Size Distribution of Business Firms - a Qrse Approach,

Competitive markets can support an equilibrium distribution of firm sizes that is highly skewed with a high frequency of extreme values and empirical evidence is consistent with this prediction. This paper presents a theoretical model of boundedly rational firms and uses their probabilistic decision-making for making an inference on equilibrium relative size distribution. Using data for US business firms the model parameters are estimated and findings suggest declining target levels of relative size, increasing probability of expansion, and a persistent negative gap between target level and center of mass. While different measures for firm size present remarkably similar patterns, capital adjustment appears to be more dispersed.

Work In Progress

A Multi-Agent Statistical Equilibrium Model of Tobin's q - with Ellis Scharfenaker

We model the dimensions of decision making that give rise to statistical regularities in Tobin's q. Both the stock market speculators and the firm manager observe the Tobin’s q and take actions, yet it is only the manager that can control the firm’s capital stock and it is mostly the stock market speculators that determine the value of a firm’s stock. We incorporate the manager's and speculator's decision process explicitly to analyze the accumulation process for publicly-traded US firms.

Investment-Saving Equilibrium in Reliable Markets

Formation and dynamics of expectations and their impacts on economic dynamics are central to economic modeling in competing schools of thought. This paper uses information-theoretical models to study the savings market in an ontologically oriented ergodic/nonergodic context and derives the capacity of the communication channels between savers and investors for single-agent and multiple-agent cases.